Beveridge was writing his report just as the UK emerged from two decades of very high unemployment. Today, the labour market is very different. Before the Covid-19 pandemic, the UK had the highest proportion of people in work ever recorded.
High rates of employment have coincided with historically high rates of in-work poverty: far too many people find their wages insufficient to provide a decent standard of living
However, high rates of employment have coincided with historically high rates of in-work poverty: far too many people find their wages insufficient to provide a decent standard of living. Many are stuck in jobs that offer virtually no training or development. This is particularly bad for people – mostly women – working part-time, where existing skills are under-utilized and little or no support is provided for progression to better-paid work. Legal innovation in the form of zero-hours and short-hours contracts has resulted in a return to forms of insecurity that seemed to have been made illegal in the 1960s.
These changes have not been reflected in public debate. Too often, politicians on the left of centre talk about the need for more jobs whilst many on the right of centre vary between trumpeting high employment rates and saying that ‘shirkers’ should get off benefits and go to work. It feels as if the debate is stuck in the 1980s or 1990s and fails to recognize where we are in the 2020s. Today’s problem is not insufficient work but insufficient secure, good quality work.
Balance of power in the labour market
Underlying this crisis is the question of power. The balance of power between low-paid workers and employers has shifted decisively towards the latter. Too many people feel trapped by a lack of progression options, and by the lack of alternative jobs that offer a better future.
If employers know that getting another job isn’t a realistic possibility, what is their incentive to try harder to keep you?
The evidence shows that leaving a job for another one is the best way to get a pay rise. If employers know that getting another job isn’t a realistic possibility, what is their incentive to try harder to keep you?
The state should have an interest in promoting good work, decent pay and better progression. A better-paid population is happier, healthier and pays more taxes. Improving social mobility is a shared objective across the political spectrum, which should mean empowering low-paid workers to have more options. And it should mean providing support for progression that is independent of the current employer.
Yet parties fight to prove their ‘pro business’ rather than ‘pro economy’ credentials, and the last thing businesses want is their workers being encouraged to look for another job. In a world in which jobs are scarce, and the priority is to widen the pool of people offered work, this might make more sense. But where the challenge is enabling people in work to progress, then supporting low-paid workers to rebalance the power relationship with their employers is vital.
The role of the state
However, the state is not simply neutral when it comes to empowering low-paid workers. The truth is that it is often part of the problem. In fields as diverse as unemployment policy, childcare transport, skills and regulation, the effect of the state’s policies is to constrain the labour supply of low-paid workers and reduce their employment options.
For example, employment services are intended to support those out of work into a job. How best to do this should be an empirical question: what works most effectively. Instead, we have an ideological filter that drives decision-making.
Our employment services treat everyone as if they are the problem to be managed, rather than the recipients of a service designed to help them
The starting point is the question of whether being out of work is the fault of the person in question – is it due to a failing on their part or is it a result of circumstances – for example, economic, health, or geographical. Our employment services seem to assume that the first option applies to most people. So our employment services treat everyone as if they are the problem to be managed, rather than the recipients of a service designed to help them.
Given that employment rates are at historically high levels, there is clearly less ‘fault’ going around and yet sanctioning – depriving people of benefits because of apparent breaches in benefit conditions – is rising. Attitudes seem to be driven by the high unemployment levels we have seen in previous decades rather than by today’s economic problems.
The way people are treated by employment services affects not only how people feel at the time they receive the service but also the wider labour market. If the state’s message is ‘take any job at any cost’, employers know that low-paid workers aren’t free to turn down jobs that offer no potential for progression.
Low-paid workers are also trapped by poor infrastructure. Childcare costs have been rising faster than wages and support through the benefit system has been frozen. Crucially, most formal childcare options don’t operate at the times when shifts are available in many low-paid sectors such as retail, hospitality and care.
The result is that families stitch their childcare together from a patchwork of family support and formal provision. The practical reality is that if one element is changed, the whole arrangement will need to be reorganised.
Poor quality, and declining, local transport services outside of London add to the problem. Local transport services often only run at peak times and during the middle of the day. Bus services to suit shift patterns and to reach the location of care services are likely to be thin on the ground.
Put the two together – complex childcare arrangements and poor-quality public transport – and it is clear that the binding constraint of the school gate or after-school club pick-up limits the pool of potential employers. Being able to leave an employer, or the possibility of it, increases the bargaining power of low-paid workers. The degradation of social infrastructure limits the options for low-paid workers.
A further reason why the state doesn’t help low-paid workers as much as it should is a series of lazy assumptions that are part of economic orthodoxy, despite emerging evidence that these are out of date.
Public discussion about productivity is obsessed with the ‘shiny and new’ yet the Bank of England says that the UK has more ‘frontier’ – highly productive – companies than comparable economies. The UK’s poor productivity performance is due to the ‘long tail’ of companies that have seen barely any productivity growth for years. Ministers should focus on improving output in the everyday economy rather than assuming that visiting an already-highly-productive, high-tech business will solve the UK’s problems.
Similarly, the default assumption in economics is that regulation of the labour market that might improve working conditions for the low-paid will always have a negative effect on the economy. However, evidence suggests that this trade-off might not exist. As increases in the minimum wage have shown, firms can actually respond to tighter regulation with more efforts to improve productivity.
What needs to change?
So how could things be different? First and foremost, we must commit ourselves to creating an economy in which the state empowers workers. This means challenging established orthodoxies on productivity, skills, employment services and social infrastructure such as childcare and transport.
Many businesses pay the voluntary Real Living Wage and others have signed up to Good Work initiatives such as the Greater Manchester Good Employment Charter
Away from national government, there are encouraging signs. For example, many businesses pay the voluntary Real Living Wage and others have signed up to Good Work initiatives such as the Greater Manchester Good Employment Charter. Devolved and city-region government have begun actively to consider how to promote better quality work. But there is still a gap in this area in national policymaking. Since the Taylor Review, commissioned by Theresa May, there has been little attention within national government to the quality of work.
When it comes to employment services, what would a more productive and empowering approach look like? Firstly, the government should be honest about its ‘Any job, Better job, Career’ slogan. The evidence is clear: most out-of-work claimants only get to A and never reach B or C. The ‘Work First’ approach, pushing people into any job, however low quality, does not help enable future progression. The ‘human capital’ approach is used in many other countries, and interaction with the state’s employment service is used to help people build a satisfying and productive career.
The danger is that the Department for Work and Pensions (DWP) is moving in the opposite direction. Universal Credit allows government to set conditions for receipt of in-work benefits. Announcements from the DWP suggest they are likely to demand that low-paid workers try to seek more hours in their current job. Pressure to do more of the same does nothing to address low pay rates.
Jobcentre staff should be capable of inspiring people to develop their careers and have the skills to support access to quality opportunities that offer meaningful careers rather than be a ‘nagging’ service that metes out punishment. Why not equip people with more knowledge about employment rights? This would leave them less open to exploitation and reduce the potential for rogue employers to create a race-to-the-bottom on pay and conditions.
Switching to an objective of supporting longer-term career development requires a shift in priorities. Rather than short-term reductions in the benefit bill, the measure of success should be higher hourly rates of pay in the years after entering work. This may cost more in the short term but has obvious benefits for people, businesses, the economy and government finances in the long term.
As we have seen, an unrealistic attitude to childcare and poor local transport contribute to the narrowing of labour market horizons when caring responsibilities intervene. To liberate the UK’s economy from its low-pay low-productivity rut, such services must be treated as economic infrastructure and not just social services.
Juggling childcare and shift work in sectors such as care, hospitality and retail is a long way from the corridors of Whitehall. Low-paid work does not fit the simple 9-to-5 pattern of office workers, and neither should childcare and transport services.
Improving work quality and employer practices
More importantly, government action has been weakest on the need for improvement in the quality of work. Equating better labour market standards with higher business costs has led to backtracking decades of employment protection.
Having high labour standards should be something to be proud of. This will improve the health and wellbeing of the population but also its wealth as productivity starts to improve
The minimum wage has resoundingly disproved the ‘equity-efficiency’ trade-off. Having high labour standards should be something to be proud of. This will improve the health and wellbeing of the population but also its wealth as productivity starts to improve.
Politicians should ensure that their policies are actually ‘pro-economy’, which may be different in some situations from being ‘pro-business’. Being pro-economy means making business compete harder to attract workers, shifting the balance of power so that workers – particularly low-paid women – can pick and choose from employers and not the other way round.
If we are to support workers to develop the skills and confidence to get new jobs, in principle, such support cannot be delivered through the current employer: as the point is to widen their choices. So we need to consider job brokerages and skill support delivered through other means.
Employers need to be better managers and restoring employment protections, such as the right to a meaningful contract of employment, is an important step. However, much more needs to be done through government’s soft power to support and encourage Good Work at a national level.
Changing economics and economic policymaking for the better
Although there are a range of policies that can help, some of the challenge lies in changing the economic thinking that underlies policymaking. Economics should reject the notion that, in the short-term, workers have a fixed level of productivity, which ignores a mountain of evidence that management matters.
Specifically, it is management outside of the small number of frontier firms where efforts need to be focussed. The challenge is to improve management education and support for small businesses. There have been pilot projects which have had some success, and recent Chancellors of the Exchequer have asked the question, but this is a conversation that has only just started.
We need to develop a work culture where being good at management is something to be proud of, to aspire to, and worth spending money on learning
We need to develop a work culture where being good at management is something to be proud of, to aspire to, and worth spending money on learning. This cannot all be about government, but it has a crucial role to play in accelerating this process. If we get this right, we have the prospect of making a real difference to the UK’s productivity as a whole, providing higher quality work to many more people, and tackling the UK’s low pay problem.
Drawn from Ashwin Kumar’s book, Idleness, with Agenda Publishing.
Ashwin Kumar is Professor of Social Policy at Manchester Metropolitan University. He has previously worked as Chief Economist at the Joseph Rowntree Foundation, Senior Economic Advisor at the Department for Work and Pensions and as an economic advisor to Gordon Brown.
Header Image Credit: Agenda Publishing
TO CITE THIS ARTICLE:
Kumar, Ashwin 2022. ‘Idleness’ Discover Society: New Series 2 (3): https://doi.org/10.51428/dsoc.2022.03.0006